Elon Musk’s Budget Cuts: A Look at the Potential Impact on Social Security and Medicare
The latest cover of Time magazine features Elon Musk seated at the Resolute Desk in the Oval Office, behind the U.S. flag and the presidential flag. This altered image implies that Musk holds more power in the White House than President Trump.
Regardless of your belief in this portrayal, Musk’s role in the second Trump administration is clear. Trump has appointed Musk, the CEO of Tesla (NASDAQ: TSLA) and SpaceX, as well as the key owner of X (formerly Twitter), Neuralink, and The Boring Company, to spearhead significant cuts to federal spending. This raises questions: Is Musk targeting programs like Social Security and Medicare?
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Image source: Getty Images.
Musk’s Role in Trump’s Administration
Musk publicly supported Trump during the presidential campaign, contributing a substantial $281 million to various political action committees and organizations backing Trump’s comeback.
In September, Trump announced during a speech at the Economic Club of New York his intention to form a commission for a “complete financial and performance audit of the entire federal government.” Musk was chosen to lead this initiative.
At a Trump campaign rally, Musk was asked about potential federal budget cuts. He confidently replied, “At least $2 trillion.”
After Trump’s inauguration, he swiftly established the Department of Governmental Efficiency (DOGE) through executive order. This name cleverly references Musk’s interest in the Dogecoin (CRYPTO: DOGE) cryptocurrency. Initially, Musk and biotech entrepreneur Vivek Ramaswami were slated to lead DOGE, but Ramaswami stepped aside to focus on his gubernatorial campaign in Ohio.
Finding $2 Trillion: The Challenge Ahead
Musk and the DOGE team quickly set to work identifying federal spending cuts. In its first 80 hours, DOGE reported canceling around $420 million in current and pending federal contracts. By January 28, DOGE claimed to save approximately $1 billion daily, with aspirations to increase this amount to over $3 billion per day.
DOGE is saving the Federal Government approx. $1 billion/day, mostly from stopping the hiring of people into unnecessary positions, deletion of DEI and stopping improper payments to foreign organizations, all consistent with the President’s Executive Orders.
A good start,…— Department of Government Efficiency (@DOGE) January 29, 2025
Despite these early successes, Musk admitted in an interview that achieving a $2 trillion cut would be challenging. He noted, “I think if we try for $2 trillion, we’ve got a good shot at getting $1.” However, even this target might be difficult to reach.
Currently, about 24% of the $6.9 trillion federal budget is allocated to health insurance programs, with Medicare accounting for roughly half of that. Social Security takes up 21% of the budget, while defense and national debt interest each consume about 13% and 8%, respectively. Only 21% is left for other federal spending.
Impact on Social Security and Medicare
Social Security is the only budget item exceeding $1 trillion, with an expenditure of $1.5 trillion. Medicare is close behind, costing $912 billion.
It is likely that significant cuts to Social Security and Medicare benefits would be necessary to achieve a $2 trillion reduction in federal spending. On February 5, DOGE announced the cancellation of a contract with the Social Security Administration that would save about $1 million. The organization has also accessed Medicare and Medicaid records.
However, cuts to Social Security and Medicare are unlikely. Trump vowed during his campaign that he “will not cut a single penny from Social Security or Medicare.”
Despite the narrative suggested by the recent Time magazine cover, it is Trump who currently occupies the Resolute Desk, not Musk. Although Trump must approve legislation for it to become law, any changes regarding Social Security and Medicare would require congressional approval, which is highly improbable.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
